You issue interest invoices to debtors who have paid their debts too late.
You process interest notes in three steps:
- The system makes a proposal of interest invoices to be issued according to your selections. A control list can at all times be printed. At this stage, the interest invoices are preliminary, changes are made in the next step.
- You make changes in the proposal, and print new control lists until you are satisfied with the proposal.
- The interest invoices are issued and printed, and the A/R and G/L are updated with the new transactions.
The basis for separate interest calculations
When you calculate interest for an invoice the total invoice amount is split into two parts:
- Remaining amount
- Settled amount
These are the basis for separate interest calculations, and they are independently controlled on document type level by values you can define in Interest/Paid and Interest/Open items.
Interest based on Remaining amount is charged for the non-settled amount of the invoice at the calculation day and for the time period starting from the day after the invoice due date and ending with the interest calculation date.
Note: This interest will not be calculated if the document type of the invoice has the Interest/Open item field value set to NO in Work with document types.
Interest based on Settled amount consists of interest amounts charged for each payment that partly settle the invoice after its due date. The period for the interest amount calculation starts with the day after the invoice due date or after the last updated interest calculation date. It ends with the payment date or the calculation date if the Interest handling code in the Interest rule file is 2 or 3 and the payment date is after the calculation date.
Note: This interest will not be calculated if the document type for the invoice has the Interest/Paid value set to 0 in Work with document types.
The calculation of interest can be per started day, started week, started month or be a fixed rate. The calculation per started day can be done based on a year with 360, 365 or 365 (366) days, but all other methods use 365 (366) days.
Automatic issuing
The first interest invoice that is issued for a document will be for the period between the day after due date until payment or calculation date. If interest is charged per started week or month, the system calculates the number of started periods for this time span. If interest is issued at regular intervals before payment is done, the next interest invoice will be for the time period from the day after last calculation date (if charged per day) or from the day after the ending date of the last period for which interest was charged with the first interest invoice (if charged per week or month).
Exchange rate
The exchange rate used when calculating the interest amount is according to the time period and level defined in the A/R control file, based on the calculation date. If documents are inactivated and activated during maintenance of the proposal, the exchange rate will be recalculated based on the actual date. If the exchange rate is missing, an error message will be printed on the control list, and you will not be able to update and print the interest transactions.
Coin adjustment
You can use coin adjustment on customer/currency level if the Adjust inv amount field in Work with currencies is completed.
Accounting
The system automatically creates the G/L postings for the interest invoices. The control account and contra account postings are based on the accounting rules you set up for the document type connected to system document type IND.
The coin adjustment is posted to the XDC pseudo account.
If you use the system defaults for document type IND, the system uses the following pseudo accounts to retrieve the proper General Ledger accounts:
| Pseudo | Variable | Description | D/C |
|---|---|---|---|
| XDDEBaa | A/R group | Control account | D |
| XDIcccc | Transaction currency | Invoiced interest | C |
If you change document type IND, and use other pseudo accounts, the control account variable must still be the A/R group. The contra account variable may, however, be the document type, transaction currency, A/R group or voucher type.
If the pseudo accounting does not result in valid accounts, an error message will be printed on the control list, and you will not be able to update the proposal.
The accounting for coin adjustment is the same as for interest invoices except for the following:
| Pseudo | Variable | Description | D/C |
|---|---|---|---|
| XDDEBaa | A/R group | Control account | C |
| XDCcccc | Transaction currency | Coin adjustment | D |
If the pseudo accounting for coin adjustment does not exist you will receive interest invoices without coin adjustment.
Enquiries and printouts
You can follow up on both the interest invoice documents, drill down to the A/R transactions enquiry and then further down to view the G/L postings that the system creates when you update the proposal. You can also view interest invoicing historical details, drill down to the A/R transactions enquiry and view the invoices that were not paid, and which are the basis for the interest invoice. See View historical details of an interest invoice for instructions.
- A/R transactions enquiry.
- Balance enquiry – for enquiries on the accounts used when posting the invoiced interest.
- Interest invoice control list – showing the invoices included in the proposal, with date ranges for interest calculation, as well as interest percentages and amounts. The Interest invoice control list also displays actual amount/currency and coin adjustment amount/currency.
- A/R interest invoice journal – showing details for the created interest invoices.
- Interest invoices – If the Group by cost centre field for the applied interest rule was set to NO, the system proposes one interest invoice per debtor and currency, except for sundry debtors, which have one interest invoice per document. If the Group by cost centre field for the applied interest rule was set to YES, then the system will propose one interest invoice per debtor, currency, and cost centre.
If the system should update the General Ledger immediately, the system will also print the G/L journals.
You can use the A/R transaction list to print details for interest invoices. Use the Document type selection parameter.
You can use the G/L transaction list and the reports from DC1 Report Writer to print details for the accounts used when posting invoiced interest.